Court Decision Clarifies Applicability Of ‘Red Flags Rule’

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imageA recent federal appeals court decision that dismissed a suit focusing on the Federal Trade Commission's (FTC) so-called Red Flags Rule "validates" its long-standing argument that physicians who bill after providing services are not subject to that rule as creditors, the American Medical Association (AMA) said Monday.

Ruling on American Bar Association v. FTC this past Friday, the U.S. Court of Appeals for the District of Columbia said Congress had clarified who must comply with the Red Flags Rule when it passed a bill in December exempting physicians and lawyers. "The enactment (by Congress) of the Clarification Act moots this case," writes Judge Harry Edwards in the court's opinion. "Because the new legislation has clearly altered the posture of the case, there is no longer a live 'case or controversy' before this court."

Under the "Identity Theft Red Flags Rule," the FTC had initially stipulated that professionals--such as healthcare providers--would need to implement a written identity theft prevention program designed to detect the warning signs--or "red flags"--of identity theft in their day-to-day operations.

The appellate court's decision "reinforces the intent of a new law clarifying the scope of the Red Flags Rule and helps eliminate any further confusion about the rule's application to physicians," says AMA President Cecil Wilson, MD. He adds that the AMA “will remain vigilant that the FTC respects the meaning and intent of the Clarification Act."

The AMA had worked closely with FTC officials and Congress and had been engaged in a lawsuit with other physician groups to challenge the FTC's efforts to extend the red flags rule to all physicians. That lawsuit, filed by the Litigation Center of the AMA and the State Medical Societies, the American Osteopathic Association, and the Medical Society of the District of Columbia, and joined by 26 national medical specialty societies, will now formally end.